Industrial metals plunged and gold rallied as the emergence of a rapidly spreading, highly mutated strain of SARS-CoV-2 sparked a sell off in financial markets.

Base metals, including copper and aluminum, fell more than 3% in London as investors weighed the risk that the new variant identified in South Africa could trigger new epidemics and derail growth in the major industrial economies in the world.

Scientists say it carries a high number of mutations that could make it more effective at evading existing vaccines.

The new tension creates new risks for the outlook for metal demand, putting at risk a recent price rebound driven by chronic supply constraints that have led to a sharp decline in global inventories.

Gold has trimmed recent losses as investors across financial markets questioned whether further outbreaks could complicate central banks’ efforts to withdraw ultra-accommodative monetary policies.

Traders rushed to lower their bets on rate hikes on Friday, as safe-haven currencies rallied.

“Metal prices had increased due to the emphasis on fundamental physical sealing,” Amalgamated Metal Trading research manager Tom Mulqueen said by phone. “Now this new variant of the virus has appeared and the market is on the run to safety.”

Copper fell 3.5% to US $ 9,459 a tonne and was trading at US $ 9,467.50 on the London Metal Exchange, as all base metals traded lower.

Spot gold rose 1.2% to US $ 1,809.55 an ounce, while silver traded little and platinum and palladium fell.

Gold for December delivery on Friday rose US $ 1.20 to US $ 1,785.50 an ounce, down 3.6% weekly.

“The uncertainty over the possible consequences of the new variant of the virus is a clear reminder to markets that this pandemic is not over yet,” said Alexander Zumpfe, senior trader at refiner Heraeus Metals Germany GmbH & Co, in a note. “The price of gold should remain strong in this environment and the subject of tapering should take a back seat for now.”

Iron ore futures also plunged more than 6% in Singapore, crushing a weekly gain as cautiousness settled in the market again.

Aside from the risk posed by the new variant, there are others on the way in the Chinese real estate industry, while local governments have struggled to find good projects to spend their money on.

Additional reports by AP

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